Exam 24: From the Short Run to the Long Run: The Adjustment of Factor Prices

Given current limitations,fiscal policy as a macroeconomic stabilizer is more defensible the ________ the output gap being suffered,an argument supporting ________.

The curve that is sometimes called the "long-run aggregate supply curve" (vertical Y*)relates the aggregate price level to real GDP

Suppose the following conditions are present in the economy: - firms are increasing output to meet strong demand for their goods - workers are able to demand higher wages as firms try to bid workers away from other firms Which of the following statements describes the adjustment that will happen in the AD/AS macro model?

The use of government purchases (G)as a fiscal policy tool can have an effect on long-run growth in the economy.Under what circumstances might an increase in G cause the level of potential output ( )to increase?

The table below shows data for five economies of similar size.Real GDP is measured in billions of dollars.Assume that potential output for each economy is $340 billion. TABLE 24-1 -Refer to Table 24-1.Which of the following statements best describes the situation facing Economy B?

Which of the following will occur as part of the automatic adjustment process in an economy with an inflationary gap?

Consider the basic AD/AS macro model in long-run equilibrium.A negative AS shock will ________ the price level and ________ output in the short run.In the long run,the price level will ________ and output ________.

Consider the simplest macro model with demand-determined output.Other things being equal,the ________ the value of the simple multiplier,the ________ stable is real GDP in response to shocks to autonomous spending.

The growth rate of potential output might be decreased by an expansionary fiscal policy if

Consider the AD/AS macro model.The wage-adjustment process is asymmetrical because

FIGURE 24-2 -Refer to Figure 24-2.If the economy is currently in a short-run equilibrium at ,the economy is experiencing

An inflationary output gap is characterized by

The table below shows data for five economies of similar size.Real GDP is measured in billions of dollars.Assume that potential output for each economy is $340 billion. TABLE 24-1 -Refer to Table 24-1.Consider Economy E.Which of the following best describes the positions of the aggregate demand and aggregate supply curves in this economy?

Consider the AD/AS model.In the long run,after factor prices have fully adjusted to any output gaps,real GDP

Suppose Canada's economy is in a long-run equilibrium with real GDP equal to potential output.Now suppose there is an unexpected and sharp reduction in desired business investment expenditure.In the short run,________.In the long run,________.

FIGURE 24-5 -Refer to Figure 24-5.Following a positive demand shock that takes the economy from E₀ to E₁,the movement of the economy from E₁ to E₂ indicates that

The diagram below shows an AD/AS model for a hypothetical economy which is initially in a short-run equilibrium at point A. FIGURE 24-7 -Consider Figure 24-7.At the initial short-run equilibrium,there is ________ output gap of ________.This gap could be closed by a ________.

FIGURE 24-5 -Refer to Figure 24-5.The economy is not in long-run equilibrium at E₁ because the

A recessionary output gap implies that

The diagram below shows an AD/AS model for a hypothetical economy which is initially in a short-run equilibrium at point A. FIGURE 24-6 -Refer to Figure 24-6.If the government takes no action to change the short-run macro equilibrium in this economy,then